Commodities: Alcoa Has Net Losses for Quarter

Aluminum prices hammer commodity companies as demand plunges

Aluminum giant Alcoa Inc. (AA) reported losses far greater than projected on Monday, with net losses coming in at $1.19 billion, or $1.49 a share. That's in contrast to the strong quarter they enjoyed last year where the garnered a net income of $638 million, or 75 cents a share.

Analysts were looking for about a 10 cents a share loss, while the company almost had three times that with a loss of 28 cents a share.

Overall revenue for the quarter also plunged significantly with $5.7 billion, down from last year's $7.39 billion during the same period.

Most of the poor performance came from decreasing aluminum demand, which pressured prices down by 35 percent for the quarter, as the large sectors Alcoa served were themselves struggling, such as the construction and automotive industries

Talking of the measures the company is taking to combat the economic downturn, CEO Klaus Kleinfeld said in a statement, "By moving quickly to address the market decline, we are using Alcoa's strategic flexibility and solid liquidity to address the continuing economic uncertainty and emerge even stronger when the economy recovers."

Another strategy the company will put into action is the cutting of 13 percent of its workers - equaling 13,500 jobs globally - by the end of 2009.

Kleinfeld added that in comparison to many of their competitors, they are on solid footing, and when infrastructure demand kicks in again they'll be competitively positioned to take advantage of that.

Aluminum will probably lag behind other commodities in prices rising, as others will lead the way. That will keep downward pressure on prices and companies with a large exposure to the metal.